First rental applicant needn't get the nod

Q: I'm a new rental property owner, and have just selected my first tenant for the home I own. The first applicant was acceptable, but I chose the second because he was able to move in earlier. But the first person was, after all, the first. Am I risking legal action by renting to the next applicant? --Marilyn

A: When it comes to choosing tenants, careful screening is a must. Landlords check for past "good tenant behavior," which includes a history of paying the rent on time, positive recommendations from prior landlords, and an absence of terminations or evictions. But these aren't the only valid criteria -- you'll want someone who makes enough money to reasonably handle the rent, and who can meet your rental terms, such as committing to a yearlong lease or refraining from keeping a pet.

Your move-in date is one of those "rental terms." Screening for someone who can move in when the unit is available is completely legitimate, because a sound business reason underlies the requirement: You want to begin collecting rent as soon as possible! No one can argue with this.

Landlords often face situations where two or more applicants appear to be roughly equally qualified. At that point, they need a tie-breaker. It's a safe bet to use the date of application -- safe because it's an objective test and can't be construed as discriminatory.

But that's not the same as saying that the first applicant should always get the nod. You're free to consider all qualified applicants, advance those who appear qualified to a finalists list, and use the date of application only if it's the only way to break a tie. Most of the time, upon closer study, you'll see that other factors, such as a higher income, rave recommendations from prior landlords, or a long history of steady renting will naturally elevate one candidate above the rest.

Just be sure that the criteria you're using are based on sound business reasons, not subjective feelings.

Q: One of our tenants is breaking her lease and moving out two months early. She has been great about finding a new tenant -- she presented us with three applicants whom she had prescreened, and we approved one. The applicant will stay for a year and wants to move in right after the original tenant moves out, but we want to spend a couple of weeks doing whatever work needs to be done before a new tenancy begins.

The new person is content to wait, but the original tenant is concerned that she'll end up paying rent for those two weeks. We understand our duty to use reasonable efforts to re-rent, but we think we're entitled to a reasonable time for turnover, which the lease-breaking tenant should pay for. --Mike and Bella P.

A: You and your tenant have approached the situation in an admirably civil way. All too often, even in states that require landlords to use reasonable efforts to re-rent, landlords simply pocket the deposit, even when the unit re-rents right away. Tenants either don't understand that their liability for rent ended at that moment, or they have moved far away and can't feasibly sue for the deposit's return.

Tenants who break a lease without a legally justified reason, as appears to be the case here, are wise to do their best to find replacement residents, thus shortening the time that the unit is on the market -- time that the original tenant will pay for if the market is soft and it's hard to find a new tenant. In a hot market with no lack of qualified applicants, the unit might rent right away, and it's conceivable that the landlord will lose no rent at all.

I've answered questions concerning who pays for the landlord's efforts to market and show the rental when a tenant breaks the lease, but your question is new to me (though it's logically related, as you'll see). If you typically keep a unit unoccupied for a period of time between tenants, in order to assess the need for repairs or refurbishing and then do the work, your plan with respect to this vacancy is no different. But, says the tenant, when there's a voluntary vacancy, the landlord knows that he will not collect rent during that time; why should he collect it now, when the turnover period has simply been advanced a few months?

The tenant's argument might continue by drawing a parallel between this situation and the landlord's expectation that a departing tenant pay for advertising and showing costs -- there, too, no one underwrites these expenses when the vacancy doesn't result from a lease break, so why (unless there's a statute to the contrary) should they apply now?

In both cases, it's no answer to say, "The tenant was the wrongdoer so he should pay." That sort of reasoning has no place in a legal analysis over compensating the landlord for the results of the tenant's lease breaking. The only question is how to accurately compensate the landlord for the damages he has suffered.

There is a way to do this. Look at it this way: Had the original tenant stayed to the end of the term, you'd be facing two weeks of no rent while you refurbish after that. Because of the early departure, you're facing it two months earlier. Your loss is not having two weeks of rent money in the bank for two months. In other words, your loss is the interest you'd receive for two months on two weeks' rent. Given today's dismal interest rates, that's not too much.

Have another talk with your tenant. Chances are that you can come to an agreement, with the tenant perhaps agreeing to cover your "soft" costs of having to handle a new tenancy when you were not expecting to do so. But expecting the departing tenant to pay rent while you refurbish the rental for a new resident isn't reasonable.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com.